Seven out of 10 Buyers Require Financing

Seven out of 10 buyers who purchased a home in Spain in 2017 required bank financing and/or family assistance. In six out of 10 cases, only bank financing was required to complete a purchase. In one out of 10 cases, buyers also required family assistance on top of bank finance to buy their home.

These are the results of analysis carried out by property portal fotocasa revealing how Spaniards financed property purchases in 2017.

Of all Spanish buyers in 2017, 9% needed help from a family member to raise enough funds. A further 5% said they had enough to make their purchase with money obtained from the sale of their previous home. 15% of buyers said they had enough savings to cover the purchase and would not require financing.

“This report highlights that bank financing and family support are key when buying a home for most Spaniards. But we also observe that almost 30% of the people who bought housing last year did it without bank financing.” said Beatriz Toribio, director of studies at fotocasa, “a fact that is very much in line with what official statistics reflect”.

Financing, whether from a mortgage or family assistance, is also necessary for almost five out of 10 buyers in the case of initial payments related to the purchase of a home (agents, notary, taxes etc). 35% needed bank financing and 13% needed both bank financing and family support.

By age, buyers between 35 and 54 years, used mostly bank financing. The youngest group (between 25 and 34 years old), although they also go mainly to the bank, had a greater proportion of buyers who also required family support compared to the rest of the age segments.

Approximately two out of 10 buyers needed to sell a property before buying the new home. However, only for 5% of the buyers was the money obtained from the sale of the house sufficient to acquire the new property without further financing.

What type of mortgage do the Spaniards have?

Nearly four out of 10 people who were active in the purchase market in the last year are undecided about the type of mortgage that suits them. This is especially true among those who have not yet made their purchase. In fact, when asked about their preference between the fixed or variable type, the distribution is quite similar.

However, it is observed that among those who did make a purchase, more people signed a mortgage with a variable interest rate (51%) than those that chose a fixed rate (41%).

On average, buyers who went to the bank were mortgaged for 70% of the total value of the home. In 40% of cases, the mortgage accounted for between 76% and 99% of the value of the property. In addition, buyers who chose to purchase a new property generally required more financing.

“Another revealing fact in this study is that borrowers over 40 years old have practically disappeared. Only 1% of buyers got a mortgage between 41 and 44 years old and the average term was 23 years. Mortgage terms from 15 to 30 years are the most common,” adds Toribio.

Knowledge about the mortgage

The study also revealed interesting aspects about the attitude of buyers before signing the mortgage papers. Only 30% of those who bought a home last year say they have considered how much variable rate repayments could increase if interest rates go up.

On the other hand, 22% say they understand all the documents they have signed in relation to the mortgage. Only 19% said they are up to date with the evolution of the Euribor.